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Dividends Have Their Day

Dividend-focused fund managers explain ramifications of recent tax law.

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Dismissed as an anachronism during the now-distant bull market, dividend-paying stocks have made a comeback. And with good reason, said fund managers speaking at the 2003 Morningstar Investment Conference. Not only have recent tax law changes put stock dividends on a more equal footing with capital gains, making them more attractive for taxable accounts, but dividend-paying stocks' relative performance over the last three years also has reminded investors of the salutary effects they can have on a portfolio.

"I find that portfolios that have an underlying dividend tend to be less volatile," said James Barrow, who manages  Vanguard Windsor II (VWNFX) and was one of three dividend-focused stock fund managers who discussed their strategies and outlooks for income-paying equities during a panel discussion at the Morningstar conference.

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Dan Culloton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.